Last week, most domestic airlines increased their base fare to over N50,000 in response to an increase in the price of aviation fuel and other factors. As airline passengers protest the sudden increase, let’s looks at the economic consequences of the development and the sustainability of domestic air transportation in Nigeria.
Last week, most of the Nigerian airlines raised their airfares by over 100 per cent, from about N23,000 to over N50,000.
Although the increase has sparked off protests among airline passengers, airline operators however argued that the action they took would guarantee their survival in the face of the high cost of operation given the fact that they operate in a harsh environment with obsolete and inadequate infrastructure at the airports. They complained that they have to contend with poor landing aides, scarcity and high cost of aviation fuel and also the scarcity of foreign exchange.
Many Nigerians believe the new fares are not realistic because the airlines did not take cognisance of pleting personal income and the general degeneration of the economy, but the airlines countered that it is the prevailing economic situation that forced them to make the last-ditch effort at survival by raising the fares to at least recover their costs of operation.
Price Hike
Last week, many Nigerians who bought one-way tickets at the cost ranging between N30,000 and N35,000 got the shock of their lives when they wanted to buy a return ticket to their destinations a few days later. The base fare had increased from about N23,000 to N50,000.
Some people who could brace it chose to travel by road; others who felt it was not safe for them coughed out the high fares in order to buy flight tickets.
By Sunday last week, it became evident that airlines had increased their fares by 100 per cent, except Green Africa, which also increased fares but less than N50,000 base fare. As of Tuesday last week, Green Africa Airways sold Abuja-Lagos tickets for about N19,500 and return was about N18,500 but tickets advertised on its site for February 25 flights were at a cost between N35,000 to N38,000. The airline, which styles itself as a low-cost carrier, has a maximum acceptable luggage of 7kg and it charges N500 for every additional kg.
The airlines told THISDAY that the major reason they increased fares was the sudden increase in the cost of aviation fuel, which rose suddenly from N400 per litre to N420-N480 per litre, depending on which part of the country the product is being sold.
The airlines said they were jolted by the new prices, especially when there was no prior notification. The airlines also argued that while the sale of tickets is a continuum, the price in the cost of aviation is sudden so airlines lose money because they sell tickets at the cost of the old prices of the product and airlift the passengers at the new cost of the product so they make losses.
They also said that if marketers give them prior notice of even two weeks, they would be able to sell at the cost that would reflect the increase in the prices of aviation fuel.
THISDAY also learnt that as long as Naira weakens against dollars and other foreign currencies, the price of aviation fuel would continue to rise until when the country begins to refine the product locally or when the naira gains value against foreign currencies.
Product Scarcity
Another dilemma faced by airlines is that aviation fuel is scarce. Industry pundits are asking: was the product made scarce by the marketers to justify the increase in airfares because airlines even after paying for the product have to wait for it to be brought to the airport by the bowsers.
On Tuesday a major airline extended flight time from 10:30 am to 1:00 pm on its Abuja-Lagos flight because it could not refuel its aircraft in time. Passengers who had critical appointments to meet in Lagos raved and raged without succour. One of them who spoke to THISDAY said, “What was most annoying is that they waited a few minutes to departure time before they announced the change in time. Why are they doing this? Why are they frustrating passengers? These people are heartless!”
THISDAY learnt that about three weeks ago, the product was scarce in all the airports in the country and this contributed to some of the delayed flights which some airlines experienced at that period.
“The government needs to arrest the situation before it goes out of hand,” said the image-maker of one of the airlines who spoke to THISDAY.
Defending the increase in airfares, a spokesman of one of the major domestic airlines said that the new fares were a response to the increase in the price of aviation fuel, the increase in the cost of handling rates by aviation handling companies and also the increase in the exchange rate.
The official said that airlines had to increase fares to survive, insisting that without the increase most of the airlines would not continue to operate in the next three months, adding that until now, airlines have been subsidising the base fare.
“We are battling with poor infrastructure, high exchange rate, high prices of aviation fuel, even scarcity of the product and increase in the price of handling by aviation handling companies. We are feeling the economic pinch together. We should put the blame where it should be and these are forex, aviation fuel, which are the biggest reasons for the hike,” the spokesman said.
Depreciation of the Naira
On February 9, 2022, as a precursor to what was to come, the CEO of United Nigeria Airlines, Dr Obiora Okonkwo, during a press conference in Lagos with aviation correspondents to mark the first anniversary of the airline, warned that airfares must have to increase to meet operating costs of airlines; otherwise, airlines would begin to go under.
He recalled how things had suddenly changed last year.
“The first-ever flight we operated, we paid for the first litre of aviation fuel (Jet A1) at N190 per litre. Within this one year as of today (February 9, 2022), aviation fuel is N400 per litre. The first ticket we sold, the base price, was N23, 000 when aviation fuel was N190 per litre. The first foreign exchange transaction we had one year ago at the official rate was N340 per dollar. Today if it is available, it is N450 per dollar, when it is not available; the alternative market rate is N570 per dollar. This time last year when we operated the alternative market was about N370 per dollar, the official market was N340.
Alternative Travel Options
Incensed by the increase in airfares, the Senate on Tuesday called on the federal government to, as a matter of urgency, declare a State of Emergency on the nation’s federal roads.
It also urged the federal government to immediately offset its indebtedness to FERMA to enable the agency to carry out its primary responsibility of rehabilitating federal roads, especially in the face of the astronomical increase in airfares.
This followed a point of order raised to draw its attention to the increase in airfare and the fact that most of the roads are broken and need rehabilitation.
Rising under Orders 41 and 51 of the Senate Standing Orders, Senator Gershom Bassey, lamented that local airfares in Nigeria have risen by 63 per cent in response to a spike in the price of aviation fuel and the attendant cost of operation.
According to him, the rise in airfare has pegged the minimum Economy Class ticket at around N80, 000 (N50, 000) for travellers buying one-hour, one-way economy tickets. He expressed worry that the increase in airfares would increase the pressure on the neglected and dilapidated Nigerian roads and further worsen their state.
No Fixed Fares
Industry expert and Managing Director of Flights and Logistics Solutions Limited, Amos Akpan, has argued that airlines do not fix fares but fares fluctuate according to demand for seats. He observed that it is wrong to say that airlines fixed fares because if airlines’ online sites still advertise fares that are less than N50,000.
“There was no known fixed figure as airfare for a one hour flight within Nigeria by operators. Fares usually fluctuate according to seasons for different operators. You could find yourself on a flight where the passenger sitting beside you paid N45,000 whereas you paid N12,000 for example, for that same flight.
He said that so many factors are considered in pricing seats and cargo space on flights. So also does the unit price differ according to those factors.
“The operator must know the breakeven figures for its routes and aircraft type. This will be the critical input in fixing the price per seat. I have paid 50,000 on a – way economy ticket in 2021 within Nigeria, so this is not new to me. Domestic airlines need a holistic strategic approach not just an increase in airfare,” he said.
Many industry stakeholders said they are looking up to the government to intervene because air transport is a catalyst to any economy; so either government intervenes by making forex available to airlines at a lower rate or find a way aviation fuel could be produced locally, which would be a long term intervention.
The question many Nigerians are asking is whether the price hike will improve the services of the airlines.
“Will the price hike improve their services? This is because a lot of these airlines know how to treat Nigerians shabbily. They delay a lot without taking their passengers into consideration. They cancel flight at will and generally exhibit nonchalance and insensitivity in their operations. Will the hike in price curb all these? Will Nigerians get value for their money? This is what I am looking forward to see, going forward,” said a frequent flyer who did not want her name mentioned.
